Doing Business in China – Considerations for Effectively Leveraging Emerging Markets
By Bikash Chatterjee and Chat Kwan, Pharmatech Associates
The U.S. economic slowdown and the Eurozone debt crisis have created pressure in the pharma industry that shows no signs of relenting. Yet, with the global pharma market forecasted to languish in single digit growth, emerging markets such as Brazil, China, India, Mexico, Russia and Turkey anticipate double digit growth nearing 14 percent through to 2014. 1
It is clear that China and other emerging markets are set to occupy an expanding share of pharma’s geographical portfolio. Of these, China has emerged as central to many U.S. pharma strategies. According to a recent market analysis by IMS, the compound annual growth rate of the Chinese pharmaceutical market over the next five years will be 23.2 percent. Growth has been rapid: China is on course to become the world’s third-largest prescription medicines market, after the U.S. and Japan. 2
We see the accelerating global demand for cheap, effective medicines as fueling China’s pharmaceutical output, and the country has risen to the occasion. China, along with India, already supplies more than 40 percent of the active pharmaceutical ingredients (APIs) used to make U.S. pharmaceuticals, a figure that IMS expects will double in the next ten years. The growing middle class, increasing disposable income and the rollout of health insurance are key factors favoring investments. As China moves into its twelfth 5-year plan, the emphasis will be on rebalancing its economy in market sectors that are less dependent on exports. Market sectors expected to benefit from this include pharmaceutical/biotech, infotech, aerospace and energy markets.3
Several factors will have a profound impact on any pharmaceutical growth strategy that includes China.